When negotiating transportation contracts the focus is typically on matters such as rates and charges, time limits for notices and deadlines for commencing lawsuits, limitations of liability for cargo claims, and insurance coverages. These contracts can often be many pages in length…and buried at the back will be a clause relating to dispute resolution in the event problems should arise. This installment of PARCEL Counsel will take a look at such clauses and why they should not be overlooked or be “just an afterthought” once the main business points have been agreed upon.

Generally speaking, there are two methods for dispute resolution --- litigating in a court and what has come to be known as ADR (Alternative Dispute Resolution). We will start by taking a look at some basic terms, that is, “Jurisdiction,” “Venue,” and “Choice of Law clause.”

Jurisdiction is a term used to describe a Court’s power to decide a case. A Court must have jurisdiction over both the subject matter of the lawsuit and also the parties to the lawsuit.

The term venue refers to the location of the Court or forum where the case will actually be tried. Jurisdiction and venue are similar, but distinct concepts. For instance, a Court located in any county in a state may have jurisdiction to hear a particular case, but would not be the proper venue for the case if, for instance, none of the parties resided or did business in that county.

A choice of law clause is the term used for a provision in a contract whereby the parties stipulate as to which set of laws will be used in deciding a case. Typically the laws chosen will be those of the state where the Court would be located, however, that is not necessary. For instance, in disputes arising from transportation contracts, U.S. federal laws or an international treaty may control certain points relating to specific transportation issues, but, the parties could choose the laws of a particular state relating to the resolution of contract disputes over which the federal law or treaties don’t control.

Given the nature of transportation contracts, jurisdiction and venue are extremely critical. More often than not, the shipper and the carrier are located in different states. In international dealings, the transportation service provider will often be in an entirely different country on a far away continent. Accordingly, a contract clause which specifies that any litigation is to take place in the home city of a party is a distinct advantage. This is so because the cost and inconvenience associated with litigating matters “away from home” can often be as much or greater than the dollar amounts in dispute.

On the other hand, for matters involving loss and damage claims, the parties might agree to have the matter venued near the location of the incident. This could result in cost efficiencies. For instance, it might be less expensive for the lawyers to travel to the location of the incident and the witnesses than the other way around. It would also allow for the witnesses to the events to have ready access to the selected court without excessive travel costs. 

While the state used for the choice of law clause will often be the same as in the jurisdiction and venue clauses, it is not necessary to do so. For instance, the parties may wish to resolve their conflicts using the laws of a particular state whose laws are known and familiar to both parties.

In recent years, litigation has become very expensive. Accordingly, parties negotiating a contract should consider ADR. There are many formats. For instance, in Minnesota there are nine categories, the primary of which are arbitration and mediation, but also on the list are consensual special magistrate, summary jury trial, early neutral evaluation (ENE), non-binding advisory opinion, neutral fact finding, mini-trial, and mediation-arbitration (Med-Arb). 

It should be noted that the use of ADR does not have to be “all or nothing.” For instance, the parties could agree to use arbitration or mediation up to a certain dollar amount, e.g., $50,000 or $1,000,000. Similarly, the parties may wish to leave matters involving rates and breaches of contracts in the Court system, but choose to use arbitration for cargo claims with or without a monetary maximum. 

There are two organizations providing such services for the transportation community. One is the Transportation Arbitration Board, Inc. (TAB), sponsored by the Transportation & Logistics Council, Inc. (TLC) and the Transportation Loss Prevention & Security Association (TLP&SA). The other is the Transportation ADR Council, Inc., sponsored by the Transportation Lawyers Association (TLA). For more information regarding these services, please visit http://www.tlcouncil.org/TAB.

All for now!

Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com